Difference between Bookkeeping and Accounting

bookkeeping and accounting FINANCE  February 26, 2017adminshare this

Recording of transactions carried by the business is regarded as the main function of the organization. Every company records its transactions in a systemized manner to maintain the accounts of the organization, it employs a person or group of persons who are having specialized knowledge in maintenance of accounts into the organization.

The management of every business relies upon the information given by the finance and accounting departments to build up strategies for growth of the organization. There are many differences between Bookkeeping and Accounting, they are


In the words of R.N.Carter “Book- keeping is the science and art of correctly recording in books of account all those business transactions that result in the transfer of money or money’s worth”.

Book-Keeping can be defined as an action of recording, classifying and summarizing the day-to-day business transactions for finding out the profit or loss of the company and financial position of the company during a specified period.The act of Book-keeping involves the recording of the journal, posting of journal transactions in ledgers and balancing of accounts of the organization.

Book-Keeping is done by the Lower-level employees of the organization because it involves more of a clerical work to perform. The person who is responsible for Book- Keeping is called as Book-Keeper. Every transaction like sales, purchases, returns of goods, etc are recorded in the prescribed books by the Book-Keeper.


⦿ Book-Keeping presents a permanent record of each transaction took place in the organization.
⦿ Book-Keeping is usually regarded as the first stage of recording.
⦿ Book-Keeping makes a list of customers and suppliers of the company to recognize the amount to be received or to be paid.
⦿ The Book-Keeping records the transactions related to assets and liabilities which help to know the financial position of the company.


According to American Institute of Certified Public Accountants (AICPA) accounting is defined as “the art of recording, classifying and summarizing in a significant the manner and in terms of money, transactions and events, which are, in part at least, of a financial character and interpreting the results thereof”.

Accounting can be defined as an art of recording the transactions of the business, classifying the transactions into various groups according to their nature, and finally analyzing and interpreting the recorded transactions to provide the information for decision-making purposes of the organization. Accounting is more results oriented than book-keeping.

Accounting is done by the Accountant and he should prepare reports about the transactions and give advice to business managers for decision making. There are two methods of Accounting based on the recording of transactions, they are as follows

⦿ Single Entry System
⦿ Double Entry System


⦿ Accounting helps in the systematic and complete record of transactions of business.
⦿ It communicates the information about the financial activities of the organization to various parties like creditors, employees, investors, etc.
⦿ It provides information regarding decision making to help the management of the organization.
⦿ It helps the organization to be in compliance with legal requirements like income tax, sales tax, etc.


BOOK-KEEPINGACCOUNTING`The main aim of book-keeping is to maintain systematic records of the business transactions.The main aim of accounting is to analyze and interpret the recorded transactions. ScopeBook-Keeping is confined to a limited scope because it is only concerned with recording, classifying, summarizing the transactions of business.Accounting covers a wider scope because it is concerned with recording and also with analyzing and interpreting the transactions. Nature of WorkThe work of Book-Keeping is done by lower level management because of it clerical in nature.The work of Accounting involves all levels of management because recording requires low-level employees and reporting is done by medium level and analyzing is done by high level. AccountsBook-Keeping only involves Preparation of Journal books and Ledger books.Accounting involves preparation of Proft and loss account and Balance sheet for knowing the financial position. Decision MakingThe Book-Keeping cannot provide any information for decision-making purposes.The Accounting provide information and assist management in decision-making purposes. Financial PositionThe financial position of the organization cannot be ascertained by Book-Keeping.The Accounting helps to know the financial position of the organization. ErrorsThe errors made in Book-Keeping while recording of transactions cannot be found out and corrected easily.The errors made in Accounting can be found out and can be rectified easily by following some rules. Job SkillsThe book-keeper does not require any specialized knowledge to perform the work.The accountant should possess a certificate in accounting knowledge to perform the accounting work.


Besides all these things there are good chances of the happening of fraud in any organization. To control fraud in accounts of the organizations, government mandated every organization having a turnover of more than 1 crore must audit its accounts as per Indian Finance Act,2016. But recently announced Finance Act, 2017 increased the limit from 1 crore to 2 crores to audit the accounts of the company.

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